Source The Sun: Amechi Ogbonna, January 18th 2010

That the global financial meltdown is taking a far more punitive toll on various sectors of the Nigerian economy is no longer in doubt for ardent followers of the phenomenon that had already rendered developed economies prostrate over the past two years.

What perhaps some people are yet to come to terms with at the moment is the final destination of the chain of events that has generated so much angst among the business community and other stakeholders in the Nigerian project.

Back in 2008 when the scourge hit Western Europe and the United States of America full blast, no one in Nigeria had imagined that our banking industry would soon become an endangered species of sort, after several assurances given by economy managers that the country was immune to the meltdown.

The reason given by the then Governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Charles Soludo to allay fears of possible meltdown on the nation’s economy was the 2005 consolidation programme which helped the 24 banks to purportedly raise billions of naira in the capital market.

However several developments that have taken place in the banking industry and the economy since last year seem to confirm that Nigerians may have been deluded by that verdict, as the reality on ground suggests that all is not well with both the banking industry and economy as a whole.

Today, the gale of retrenchment in the banking sector is assuming an alarming dimension raising fears that the country may be in for more economic trauma this year. So far no fewer than 8, 000 bank workers have been relieved of their jobs as banks battle to rationalize cost base against their dwindling income base.

A review of the exercise shows that Intercontinental Bank has disengaged about 1500, Oceanic Bank International sacked about 3000, FinBank Plc 150 and Union Bank of Nigeria Plc, 100.

Other banks that sent their employees home over the last few weeks include, Spring Bank, 200; First Bank, 500 and Diamond Bank Plc 500, while Afribank Plc and Bank PHB Plc are expected to announce their figures soon.

A major reason for the current downsizing is because the volume of business generated currently can no longer match the cost base in terms of manpower.

Managers of the institutions have noted for instance that the large portfolio of non -performing assets and the low tempo of business in the nation’s economy which experts predict may continue in the New Year would not allow them to retain a large contingent of staff at present.

As some bank chiefs said recently, the exercise is an ongoing one which is aimed at rationalizing the cost base of the institutions.

Justifying the exercise, CBN governor Sanusi Lamido, stated recently the need for banks restructure their expense base in line with the realities of ground.

The first signs of the looming danger that finally caught up with the industry came when banks that had been posting superlative financials suddenly went cap in hand begging for funds from competitors and the CBN, prompting the setting up of an Expanded Discount Window where they could get temporary financial relief.

But for the special audit conducted by the new governor, Mallam Sanusi Lamido, most Nigerians would still have been groping in the dark with respect to the actual health status of the 24 banks.

The startling discovery by the CBN/NDIC audit team on how the various chief executives and their board eroded the values of various institutions, may indeed be the genesis of the gale of job losses in the industry.

The staggering portfolio of non performing assets in the various banks was traceable to the failure of corporate governance.

As at the end of last year, the Nigerian banking industry may have lost over 10,000 jobs.
Available indications show that more jobs will still go in the New Year as the various institutions battle to rationalize their expense base and remain competitive in the emerging dispensation.

Commenting on the seriousness of the situation he met on assumption of office in June 2009, Managing Director and Chief Executive Oceanic Bank International Bank Plc, Mr John Aboh explained: “We are going to right size our expense and will not leave anything to chance.”

Aboh stated that with staff strength of over 20,000 and a monthly wage bill of about N4billion, it would be difficult to grow the business of the bank with the huge portfolio of non performing assets. In addition to right sizing of the manpower base, the Oceanic boss noted that he would close branches that are not profitable.

Aboh said his master plan for resuscitating the bank would centre on increased productivity, cost reduction and loan recovery.

This same sentiment was shared by Mr Lai Alabi, the managing director of Intercontinental Bank Plc, who believes that the banks need to take pragmatic steps to minimize cost profile in this austere times

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